While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
Winter is definitely over here in Incline Village, Nevada. When I started my daily ten-mile hikes from the Tunnel Creek Caf? ten days ago, I had to don snowshoes in the parking lot. Yesterday, I had to climb for two hours to find snow at 8,000 feet.
It?s definitely time to put my winter equipment into storage. The aspen trees are budding and yellow crocuses are breaking out all over.
That was also the conclusion of the killer April nonfarm payroll report, which brought in an eye popping 288,000. March was revised up from 192,000 to 203,000. Even more stunning was the plunge in the headline unemployment rate from 6.7% to 6.3%. It was a perfect number. Almost. We?re almost back to normal again.
I thought we were home free on our iShares Barclay 20+ Year Treasury Bond Fund (TLT) May, 2014 $113-$116 in-the-money bear put spread.
The blockbuster release should have driven a stake through the heard of the bond market.
And fall it did?.for about 15 minutes. Then news of the White House press conference announcing a further ratcheting up of tensions with Russia over the Ukraine triggered one of those rip your face off short covering rallies that have become so common this year. Prices for the (TLT) jumped to new 2014 highs, just short of our near short strike at $113. Stocks sagged.
If you had a mole at the Department of Labor who leaked to you the April nonfarm payroll a day in advance, you would have loaded the boat with long stock/short bond positions. Instead, we got the opposite. Welcome to a trader?s dull, brutish, and short life in 2014.
Throw bad news on the market, and if it fails to go down, you buy the heck out of it. That is a valuable lesson that I have learned over the decades, and I think it applied to the Treasury (TLT) bond market on Friday.
This was not weekend I wanted to go into short of bonds so close to the money. Putin is on a roll and appears to be willing to toss the dice once again. Now, he?s calling for a United Nations Security Council Meeting. Better to talk than shoot, I always say. It?s cheaper. I?ve tried both, and definitely prefer the latter.
If there has been another valuable lesson this year, it has been to keep positions small, and stop out of losers fast. So, as much as I hate to, I pulled the ripcord on my short, taking another nick on my performance this year.
?Markets can remain irrational longer than you can remain liquid,? said the great economist and primordial hedge fund trader, John Maynard Keynes. So true, so true.
The goal here is to maintain iron discipline in risk control and be the last man still standing when trading conditions improve and markets become easy again later this year. Until then, I?ll be engaging in small, short term opportunistic trades. I?ll also be doing a ton of deep research, building short lists of positions to Hoover up when life gets better.
Mind you, yields at these levels make absolutely no sense. They are predicting that deflation is now a permanent aspect of our lives. (To understand how that might be possible, read my interview in tomorrow?s letter with Google engineering director, Ray Kurzweil). Bonds are also shouting at us that we will remain stuck at a subpar 2% economic growth rate for years to come.
The inverse of bad news is also true. If you shower good news on a stock market and it fails to rise, you sell it. This suggests that a big dump in stocks is imminent, which is long overdue.
The markets certainly think this. Take a look at the chart below showing the ?spinning tops? in the S&P 500 in recent days, where shares trade across a wide range, but remain unchanged on the day. So named because the bar looks like a child?s toy, a spinning top suggests indecision among investors and a possible coming selloff. This is what happened in the beginning of March and April, opening the way for drops of 50 and 85 (SPY) handles.
This means that the ?head and shoulders? scenario I talked about a week ago is still on the table (click here for the article ?Watch Out for the Head and Shoulders?). That?s why I quickly knocked out a (SPY) June $193-$196 put spread.
In the meantime the media deluge for the upcoming midterm elections has already started, which are still five months away. Nevada governor Brian Sandoval is basing his entire campaign on his failed attempt to stop Obamacare in the courts. It is a strategy that will be repeated across the Midwest this year.
It sounds like this will be a good summer to stay out of the country. Sell in May and go away?
https://www.madhedgefundtrader.com/wp-content/uploads/2014/05/Tops.jpg335430Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-05-05 08:55:552014-05-05 08:55:55Beware the ?Spinning Tops?
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(TLT)
Sell the iShares Barclay 20+ Year Treasury Bond Fund (TLT) May, 2014 $113-$116 in-the-money bear put spread at $2.42 or best
Closing
5-2-2014
expiration date: May 16, 2014
Portfolio weighting: 10%
Number of Contracts = 38 contracts
Throw bad news on the market, and if it fails to go down, you buy the heck out of it. That is a valuable lesson that I have learned over the decades, and I think it applies to the Treasury (TLT) bond market today.
The killer April nonfarm payroll bringing in 288,000 jobs should have driven a stake through the heart of the bond market. Even more stunning was the plunge in the headline unemployment rate from 6.7% to 6.3%. We?re almost back to normal again. I thought we were home free on our iShares Barclay 20+ Year Treasury Bond Fund (TLT) May, 2014 $113-$116 in-the-money bear put spread.
And fall it did?.for about 15 minutes. Then news of the White House press conference announcing a further ratcheting up of tensions in the Ukraine triggered one of those rip your face off short covering rallies that have become common this year, taking prices for the (TLT) to new 2014 highs just short of our near short strike at $113.
This is not the weekend I want to go into short of bonds so close to the money. Putin is on a roll and appears to be willing to roll the dice once again. Now, he?s calling for a United Nations Security Council Meeting. Better to talk than shoot, I always say. It?s cheaper.
If there has been another valuable lesson this year, it has been to keep positions small, and stop out of losers fast. So, as much as I hate to, I am pulling the ripcord. ?Markets can remain irrational longer than you remain liquid,? said the great economist and hedge fund trader, John Maynard Keynes. So true, so true.
The goal here is to maintain iron discipline in risk control, and be the last man still standing when trading conditions improve and markets become easy again.
Mind you, yields at these levels make absolutely no sense here. They are predicting that deflation is here to stay. They think that we will remain stuck at a subpar 2% economic growth rate.
They are also forecasting that a stock market correction is imminent. A big dump in stocks here, which is long overdue, could quickly add another couple of points to the (TLT). This is another reason to bail on bonds shorts. That?s also why I just knocked out a (SPY) June $193-$196 put spread.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don?t execute the legs individually or you will end up losing much of your profit.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Sell 38 May, 2014 (TLT) $116 puts at?????$3.50
Buy to cover short 38 May, 2014 (TLT) $113 puts at..??.$1.08 Net Cost:??????????????????.....$2.42
Loss: $2.65 - $2.42 = -$0.23
(38 X 100 X -$0.23) = -$874 or -0.87% loss for the notional $100,000 portfolio.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Market.jpg251375Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-05-02 14:28:262014-05-02 14:28:26Follow Up to Trade Alert - (TLT) May 2, 2014
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.Read more
Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-05-02 13:48:382014-05-02 13:48:38Trade Alert - (SPY) May 2, 2014
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more
https://www.madhedgefundtrader.com/wp-content/uploads/2011/10/slider-05-trader-alert.jpg316600Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-05-02 13:19:502014-05-02 13:19:50Trade Alert - (TLT) May 2, 2014
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-05-02 10:27:222014-05-02 10:27:22May 2, 2014 - MDT - Midday Missive
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